We should encourage a few more golden geese and promote some alternatives

I have no direct relationship with the sector, although it pays for a fair chunk of my salary and I use the high-quality public services that it helps to fund.

However, nearly everyone else in the Island benefits in the same way, although not everyone has been so keen a supporter of the finance industry over many years (and I mean many!).

There have been a few occasions when some financial institution or individual has confirmed the stereotypes that are so hard to shift. But without doubt we should be very proud of the industry that is our biggest breadwinner by a country mile.

And that’s why I sometimes feel like a traitor – because I have to admit that I can’t wait for other industries to take away some of the limelight and begin to threaten the absolute dominance of finance.

You’ll note I said ‘begin to threaten’, because I certainly wouldn’t want any harm inflicted on the Golden Goose. I would, however, like to see the Island actively encouraging a few more geese and promoting alternatives, even if they have to use scarce resources.

The 50th anniversary year of the finance industry is well worth celebrating, and Jersey Finance Ltd will no doubt do a good job in marking half a century of growth and innovation. When we stop celebrating, however, perhaps it would be a good time to look at what hasn’t happened over the past 50 years – and that’s the development of a more balanced economy.

Just in case any reader thinks I am naïve enough to believe that this was a simple oversight on the part of policy-makers, it was talked about, but I have to admit that creating diversification in what was mainly an overheated economy would have been an extraordinarily difficult trick to pull off. With an assumed policy of non-intervention by the States, it was probably impossible.

However it should have been done, or at least attempted, and the fact that it wasn’t is a failure of policy and part of the reason why our economy is suffering so much now.

Before any of our current political leaders has apoplexy, I will readily admit that the Island’s economy is strong, and that is largely down to the enormous success of finance. But the future is not guaranteed. There are already warning signs of slower growth, obviously because of the economic crisis but also because offshore financial services are not as easy a way of making money as they once were.

However the likes of Guernsey and even the Isle of Man have almost shrugged off the recession and continue to grow. The reason is obvious; their economies are more diversified.

That’s the dilemma the Island has faced for decades. We like the growth that finance brings and we are all much better off for it, so we make hay while the sun shines.

However it also makes us vulnerable. What happens if something (that could be anything, and not just recessions) impacts on the industry we rely upon so heavily?

The answer is that we need an insurance policy, and although the premiums might have been pretty high, that insurance could have been provided by encouraging different ways of making a living.

That insurance policy should have been taken out during the boom years when the finance sector was growing like Topsy. It would obviously have been foolish to curb the growth of the industry which was creating the wealth, and it was totally against the grain to divert assets and people away from finance to other far less profitable areas of the economy. There was simply no other industry which came anywhere near finance in producing the same amount of profit per employee – and there still isn’t. But perhaps we should have used other more sophisticated yardsticks to assess economic success and not simply what average profit each employee achieved.

Unfortunately a different approach was too radical then, and may still be too radical now for our conservative policymakers.

As there was no question of diverting resources away from finance, the States should have stepped in and helped other less profitable sectors of the economy. Or at the very least, much more effort (as opposed to talk) should have been put into diversification.

That needed action by the States because it doesn’t happen on its own. We might have been able to change almost seamlessly from knitting to cider making, but life is rather different now. You only have to look at the Isle of Man to appreciate that a diversified economy doesn’t happen by accident.

Such intervention in Jersey was considered heresy at the time, and some free market thinkers obviously still think the same now. Their view is that you just have to leave it to a few profit-motivated businessmen and the economy will sort itself out.

But others might have a longer-term outlook and think that it’s worth investing in insurance for the future.

There has been a slight change in attitude recently, but it’s only slight and it’s happened through necessity.

For example, it’s sometimes said that the newly expressed zeal for economic diversification is shown by the fact that we put much more taxpayers’ money into the tourism industry than we do into promoting finance.

Supporters of tourism might point out that shifting a £100m tax burden tends rather to tip the scales in the other direction, but that’s really beside the point.

The point is that despite the rhetoric, the effort put into tourism, agriculture, IT and a host of other economic possibilities has not been great. Even the effort put into those areas such as intellectual property and eGaming where the policymakers do see some future, has come very late. It’s going to be extremely difficult to take market share away from some of our more established competitors who were quicker on their feet.

But now we need this business not simply for diversification purposes but to fill the gaps in jobs and profits. That will be needed even more if the finance industry, for whatever reason, can’t do in the next 50 years what it has so admirably done in the past.

Peter Body is editor of Business Brief magazine